The True Cost of an iPhone 4S, iPhone 4, iPhone 3GS is Thousands

Along with the announcement of the $199 iPhone 4S last week, Apple also unveiled new pricing for the iPhone 4 and 3GS. Now you can get an iPhone for just $99 or for free, if you’re willing to go with a 2 year old model.

What many people forget is that the iPhone will end up costing you a lot more than the initial sale price.

Voice, text and data plans add up over two years. And on top of that there are taxes, additional fees, and incidentals that may not seem like a lot by themselves, but add up quickly over the years. It’s important to keep this in mind when making the decision about whether you can afford to own an iPhone, no matter how little you shell out from the start.

Best (and Worst) Case Scenarios

On AT&T, the minimum amount you’ll pay over 2 years with the iPhone 4S is: $199 + $1319.76 ($54.99/month)

This represents the lowest cost voice ($39.99 for 450 minutes) and data ($15 for 200MB) plans and Pay As You Go texting ($0.20 – $0.30 per text). This price doesn’t include taxes and fees, which vary by location.

While that voice plan may suit many iPhone users, the data and texting options won’t. A more likely combination is $39.99 voice, $25 for 2GB of data, and $20 for unlimited messaging. AT&T eliminated their lower cost text messaging plan earlier this year, so it’s either unlimited or pay as you go.

This combo will cost: $199 + $2039.76 ($89.99/month)

If you want to max out everything, it will cost: $199 + $3239.76 (134.99/month)

Aside from fees, these calculations don’t take into account other monthly or occasional costs such as insurance on the phone or downloading apps. Even if your iPhone is free that doesn’t mean it won’t cost you.

iPhone Cost Breakdown

There are a number of factors that go in to how much you’ll pay per month and over time for your iPhone. Some are optional, some offer a range of choices. Be sure you know the options and full cost before committing.

Voice Plan: AT&T’s voice plans start at $39.99 for 450 anytime minutes and range up to $119.99 per month for unlimited family plans with two lines of service. Additional family plan users can be added for $49.99 per month. Users can extend night and weekend calling by a few hours for $8.99/month and up.

Data Plan: For now, existing AT&T subscribers who already own iPhones can continue to get to unlimited data for $30 per month. However, new subscribers will have to choose a tiered data plan. Choices range from 200MB per month for $15 or 4GB per month for $45. Additional MB/GB are available if you run over this limit and your bill can go well north of $30 if you stream a lot of music or video. Keep track of your usage, especially if you have one of the lower cost plans. And use WiFi connectivity as often as possible to keep the phone from using your data allotment when it’s not necessary. iPhone users get unlimited access to AT&T hotspots throughout the country, which may make this easier for some.

Tethering: If you want the ability to tether your iPhone (4S, 4, or 3GS) to your computer to use it as Internet access, you must get the 4GB plan.

SMS and MMS: Text messages and Multimedia Messages (SMS and MMS) are not included with AT&T’s data plan. And, as I mentioned, plans are all or nothing. Customers can sign up for unlimited texting or pay for each one. This means that if someone texts you, it’ll cost 20 cents (30 cents if it’s an MMS). Even a short exchange can cost almost a dollar. There are apps that offer free texting which uses your data allotment instead of traditional texts.

From the iPhone 4S Announcement - credit: Engadget

Apps: At the iPhone 4S launch iOS VP Scott Forstall talked about how Apple has paid out $3 billion to developers with apps in the App Store. That $3 billion came from iPhone users. Though most apps start at $0.99 and average high price is around $2, iPhone users buy and download many apps per month. This adds up over time.

Extra Tax: If you pay state on local tax on retail purchases, be prepared to pay tax on the total unsubsidized cost of your iPhone. AT&T is technically discounting the iPhone to get to the advertised price points of $199, $99, and $0. Many states, including California, require consumers to pay tax on the unsubsidized price, which means you could spend an extra $20 if you live in a tax-heavy state like California or New York.

Insurance: AT&T offers two levels of protection to iPhone owners. The Mobile Protection Pack includes insurance on the phone (complete replacement if lost, damaged, or malfunctioning) plus 24/7 “enhanced support” and Mobile Locale to find your phone via GPS and lock it down if it’s been stolen. This costs $9.99/month. For $6.99 you can just get the insurance part. It’s worth noting that iPhone users can get support via the Apple Store’s Genius Bar already and iCloud in iOS 5 will have a Find My Phone function at no additional cost.

The Competition

This time around AT&T has some competition in the iPhone field. They’re the only carrier with the free iPhone 3GS, but both Verizon Wireless and Sprint now carry the iPhone 4 and iPhone 4S.

AT&T’s advantage is in having the lowest bottom line price. Where this carrier’s plans begin at $54.99, the lowest you can get at Verizon is $69.99 and the lowest at Sprint is $79.99. The reason is that AT&T has that rock bottom 200MB/month data plan whereas Verizon’s lowest data plan is 2GB for $30 and Sprint only offers unlimited data. Add 2GB of data on AT&T and you get $64.99/month – $5 less than Verizon, still.

The Bottom Line

If you’re an existing iPhone owner, these fees and costs are already a part of your life (and your budget). But with iCloud coming to iOS 5, you can leave some charges behind (like the one for MobileMe). Plus, there are ways to chip away at some other fees, like apps that allow you to text for free or using WiFi wherever possible to limit data usage.

Consumers new to the iPhone (or any smartphone) should carefully consider how big a chunk this will take out of your budget. No matter how affordable the phone may seem, you’re committing to a 2-year relationship with AT&T unless you’re willing to pay hefty fees to get out of the contract. So be sure to take that price into account as well.

29 Comments

Guest

10/11/2011 at 8:27 am

Your argument that the iPhone 4S costs thousands is old and out of context. Yes, relitive to a feature phone where you’ve only got voice access, you’re going to pay AT&T more, but you’re also getting more out of your phone and service.

Do you calculate the cost of a computer at home to include your Internet Access, electricity, the furnature for the computer and the applictions you decide to buy? What about your clothes? do you calculate the cost of laundry in the cost? doubt it. These are on going utility costs that add to the functionality of the original product.

How about looking at something with a realistic eye rather than rehashing a point that was just as invalid when brought up almost 5 years ago.

I’m a Microsoft guy and not an Apple fanboy in the least, but the logic in this article is completely flawed. You’re stating this like the costs are exclusive to the iPhone. Guess what? Any smart phone, whether it uses the iOS, Blackberry, or Android platforms are going to have the exact same costs and exact same problems if you use them in the same manor.

I can only figure you’re associated with a competitor or just have some sore spot for Apple, because this article is just ridiculous.

“or any smartphone” doesn’t exempt this article from the clear bias against the iPhone. Please show me where in the article it states a cost that is exclusive to the iPhone. Apps certainly aren’t exclusive. Insurance? Nope… How about… Tethering? Nope.

Nothing in this article is exclusive to the iPhone, and yet you pick it out because it allows for a catchier title and more sensationalist story.

The title of this article is very misleading and ambiguous… I thought the article was going to break down the actual cost to produce, manufacture and market the product… Instead I got carrier service charge costs.. Either way, Apple has more money trees growing in the background

Tough week to say anything at all about an Apple product. The Apple fanatics are in mourning–the slightest hint of criticism and they’ll have their diapers in a bunch, even more than usual. But they like to feel picked on.

The article is a useful breakdown of the costs of owning an iPhone, from the very low advertised point-of-purchase nonsense to a broad range of potentially unforeseen costs for additional “services”–many of which are necessary to make the phone work.

It is not a comparison of brands, logos, companies, technologies or political philosophies. So, if you sense that your favorite and most comforting little corporate branding gimmick of an icon has been bumped a bit harshly, try to understand that if all writers had to list disclaimers, citing everything their articles are NOT about, the internet would burst very quickly.

If you’re legacy — as in had the same carrier forever and new plan prices don’t apply to you — then this is possible. I’m on Verizon and have unlimited data because I’ve had that plan since before tiered came along and my voice plan is cheaper than the current as well.

Eye opener as I was contemplating getting an iphone. I’ve never had a smart phone before and use an old 35.00 per mo w/350 free mins and free weekend mins plan with verizon. My bill after taxes (I never go over my mins) usually runs around 48.00. Verizon has discontinued the plan I’m under and I will have to choose another. I would have found out when I upgraded, but good to know before I buy a phone where all the hidden costs are located.

I see your point. I think any smartphone on any carrier is going to be comparable. That’s just the case for the Smartphone market. I guess to truly avoid the outrageous mobile bills, you have to consider returning to the days before instant access to email and internet. I think instead of the iPhone, I’m going to get a Motorola Startac.

I’ve maxed everything and I get bills for over $300 some months…I call every month and someone who doesn’t know what they are doing tries to fix my bill and resigns me up for a more appropriate plan for me – it’s like the blind leading the blind.

Just because you HAVE the money, doesn’t mean you want to own and use a smartphone. It’s cost vs. reward. Do I want to be in constant contact? Do I want to be like most other people at my kids’ sporting events who would rather sit and text or play games or surf the web, rather than pay attention and support my kids? No.

So for the few times when I wish I had internet access on a road trip to access the radar, why would I pay that much for a phone and data/voice plan? I have internet access at home, access at work… why do I need to access the internet everywhere? I have a pay-as-you-go plan for my flip cell phone, and if someone needs me for an emergency (or I have one myself) I use that.

But just because someone questions the cost of something, doesn’t mean they don’t have the money for it. It means they are conscious of their money and budget, and are weighing the cost vs. need of it, and don’t spend it on frivolous WANTS.

Fizzixgai I totally agree with you. It has nothing to do with people cant afford it. To me it makes no sense. I would rather spend that money on something more practical like my retirement. I bet you most people that own a iphone dont have one cent to any sort of retirement.

All this complaining and ahemming about the iPhone.. If you want a cheaper alternative you have a few different options..

Get Vonage and remain tied to your desktop/laptop/CAT5 outlet waiting on a call from your friends who are out having a blast without you because they all have smart-phones…

Go old school and get one of those rotary phones with absolutely NO “hidden costs”. However this option might definitely ensure the end to any possibility of a social life what so ever… Get a pager and be cool like that drug dealer creeper on the corner who’s pager hasn’t worked in 10 years but he thinks it adds swag on the hip of his dirty old starter jogging pants..

Or stay out of the smartphone market completely and buy one of those handy dandy cell phones that has voice capabilities and sms with one of those nifty little VGA cameras. That even if you took a photo of your genitalia to share with the world you would be safe from humiliation because it would be completely indistinguishable… The world is full of the have’s and the have not’s. You can either afford the iPhone or you can’t. The world could care less.. I would have rather read an article about how much it would cost to proposition K. T. Bradford :-) lol…

This is a GREAT article to teach people that the low up-front costs are just the start. When added up over 2 years… It does cost thousands. Yes, any carrier has about the same fees, but the name Apple catches the eye and any good shopper needs to start somewhere…

I was just on At&t’s site checking out their mobile plans & I’m shocked you have to buy unlimited Text plans for $20 or nothing. Now, I”m here reading about it, Straight Talk is looking better & better! BYOD SIM here I come.